Cowan v Scargill

Cowan v Scargill[1985] 1 Ch 270; [1984] 2 All ER 750

Sir Robert Megarry V.C. stated at pp 286:

“I turn to the law. The starting point is the duty of the trustees to exercise their powers in the best interests of the present and future beneficiaries of the trust, holding the scales impartially between different classes of beneficiaries. This duty of the trustees towards their beneficiaries is paramount. They must, of course, obey the law, but subject to that, they must put the interests of their beneficiaries first. When the purpose of the trust is to provide financial benefits for the beneficiaries, as is usually the case, the best interests of the beneficiaries are normally their best financial interests.”

Sir Robert Megarry V.C. stated at pp 290:

“I can see no reason for holding that different principles apply to pension fund trusts from those that apply to other trusts. Of course, there are many provisions in pension schemes which are not found in private trusts, and to these the general law of trusts will be subordinated. But subject to that, I think that the trusts of pension funds are subject to the same rules as other trusts. The large size of pension funds emphasises the need for diversification, rather than lessening it, and the fact that much of the fund has been contributed by members of the scheme seems to me to make it even more important that the trustees should exercise their powers in the best interests of the beneficiaries. In a private trust, most, if not all, the beneficiaries are the recipients of the bounty of the settlor, where as under the trust of a pension fund many (though not all) of the beneficiaries are those who, as members, contributed to the funds so that in due time they would receive pensions. It is thus all the more important that the interests of the beneficiaries should be paramount, so that they may receive the benefits which in part they have paid for.”

Notes

Government Regulated Superannuation Funds must have Trustees. In consequence, unless the trustee legislation or the rules of the trust provides to the contrary the general law of trusts, particularly the general law on the duties of trustees applies {Cowan v Scargill[1985] 1 Ch 270 at 292; [1984] 2 All ER 750 at 764}.

“It is the intention of the Parliament that this Act is not to apply to the exclusion of a law of a State or Territory to the extent that that law is capable of operating concurrently with this Act”.

Section 52(2)(a) of the Superannuation Industry (Supervision) Act 1993 requires Trustees to act honestly in all matters concerning the Superannuation Fund. This must correspond substantially with the general law. Trustees have a duty to act bona fide in the best interests of the beneficiaries (inc Members) and there is a more fundamental duty to obey the law {Cowan v Scargill[1985] 1 Ch 270 at 287; [1984] 2 All ER 750 at 760}.

Section 52(2)(c) of the Superannuation Industry (Supervision) Act 1993 requires “That the trustee’s duties and powers are performed and exercised in the best interests of the beneficiaries” which corresponds with the general law. Since in many cases much of the property in a superannuation trust will have been contributed by members makes the general duty on the trustees to exercise their powers in the best interests of the beneficiaries even more important {Cowan v Scargill[1985] 1 Ch 270 at 290; [1984] 2 All ER 750 at 763}.